RCMS Anti-Money Laundering & KYC 4 — Questions and Answers
Question 1: A compliance officer discovers that a long-standing client recently appeared on the OFAC SDN list. What is the immediate required action?
- Close the account within 30 days and file a SAR
- Block the account and file a report with OFAC as soon as possible (Correct answer)
- Notify the client and give them 15 days to dispute the designation
- Escalate to senior management and monitor for 90 days before acting
Correct answer: Block the account and file a report with OFAC as soon as possible
Matching the OFAC SDN list requires immediate blocking of assets and reporting to OFAC — no advance notice to the customer is permitted.
Question 2: What is the 'tipping off' prohibition in AML law?
- The ban on using insider information for trading purposes
- Prohibition against informing a customer or subject that a SAR has been filed about them (Correct answer)
- Restriction on sharing SAR data with foreign regulators
- The rule preventing compliance staff from accepting gratuities from customers
Correct answer: Prohibition against informing a customer or subject that a SAR has been filed about them
Tipping off — disclosing to a subject that a SAR has been or may be filed — is prohibited under federal law to protect the integrity of investigations.
Question 3: Which of the following best describes 'integration,' the third stage of money laundering?
- Combining illicit funds with legitimate business revenue before banking them
- Re-introducing laundered money into the economy in a way that appears legitimate (Correct answer)
- Integrating AML software into a bank's core banking system
- Merging multiple shell company accounts into a single entity
Correct answer: Re-introducing laundered money into the economy in a way that appears legitimate
Integration is the final stage where laundered funds re-enter the legitimate economy, making their illicit origin nearly impossible to trace.
Question 4: Under the USA PATRIOT Act Section 314(b), financial institutions may voluntarily share information with each other for what purpose?
- To coordinate marketing of financial products to shared customers
- To identify and report activities that may involve money laundering or terrorism financing (Correct answer)
- To share credit risk data to prevent loan fraud
- To reconcile correspondent banking fees and settlement discrepancies
Correct answer: To identify and report activities that may involve money laundering or terrorism financing
Section 314(b) allows financial institutions to share information voluntarily with one another to identify and report money laundering and terrorist financing.
Question 5: What is the primary risk associated with correspondent banking relationships from an AML perspective?
- Currency conversion losses due to exchange rate volatility
- Nested relationships allowing high-risk respondents access to the financial system without proper vetting (Correct answer)
- Overexposure to a single foreign jurisdiction's sovereign debt
- Excessive fees that reduce profitability of AML compliance programs
Correct answer: Nested relationships allowing high-risk respondents access to the financial system without proper vetting
Nested correspondent banking allows respondents to bring in their own customers, potentially including high-risk or sanctioned parties, without adequate due diligence.
Question 6: A casino reports that a patron repeatedly exchanges chips for cash in amounts just under $10,000 over a single day. What should the casino's AML compliance officer do?
- File a CTR only if the patron's total exceeds $10,000 across all transactions
- Aggregate the transactions and file a CTR because casino regulations require aggregation (Correct answer)
- Only file a SAR since the individual transactions are below the threshold
- Take no action because each individual transaction is below the reporting threshold
Correct answer: Aggregate the transactions and file a CTR because casino regulations require aggregation
Casinos must aggregate transactions by a single patron within a gaming day and file a CTR if the aggregate exceeds $10,000.
Question 7: Which element is NOT typically part of an effective AML compliance program under the BSA's 'four pillars'?
- Designation of a qualified compliance officer
- Development and implementation of internal policies and procedures
- Mandatory customer profit-sharing disclosures (Correct answer)
- Ongoing employee training programs
Correct answer: Mandatory customer profit-sharing disclosures
The BSA's four pillars are internal controls, a designated BSA officer, employee training, and independent testing — profit-sharing disclosures are not included.
RCMS Anti-Money Laundering & KYC 4
A compliance officer discovers that a long-standing client recently appeared on the OFAC SDN list.
What is the immediate required action?